B&M’s share price is down 16% since it admitted on Wednesday that it could have done better amid shrinking profits.
The retailer’s underlying earnings grew just 1% to £620m after the company issued a profit warning in February, downgrading its EBITDA guidance range to between £605m and £625m.
Group revenue rose 3.7% to £5.6bn, primarily driven by new store openings and a strong performance in France.
However, UK like-for-like sales fell 3.1% in the year after four consecutive quarters of declining performance.
“This sustained weakness reflects deeper structural pressures within the UK business, particularly in core fmcg categories that should be anchoring footfall,” said Emily Scott, retail analyst at GlobalData.
Despite this, total UK sales grew by 3.8%, driven by a store rollout programme that saw 45 new sites opened.
B&M has struggled to keep pace with the major supermarkets through the cost of living crisis as the likes of Tesco invested aggressively in price and value perception. This has left B&M’s fmcg offering particularly exposed, with both volume and value like-for-like sales falling last year.
These difficulties have caused its share price to halve since the end of 2023, when it was close to an all-time high.
B&M recognised that although 2024 was a challenging year for all UK retailers, with heightened consumer caution and limited wage growth, its own “operational execution could have been better”.
Yet despite its troubles, some analysts remain optimistic. “The shares reflect continued bad news. We do not think this will emerge, quite the opposite in fact,” said Jonathan Pritchard at Peel Hunt.
Kate Calvert, equity analyst at Investec, called B&M “a well-run, highly cash-generative business with a robust market position in a consolidating market and an attractive UK/French growth runway which is not reflected in the current valuation.”
With the company’s new CEO, Tjeerd Jegen, starting this month, investors are now keenly awaiting to hear his new direction.
“Investors will be looking for the new boss to do a thorough review of the business, work out what’s gone wrong, do a ‘kitchen sink’ job and outline a plan to get back on top,” said Russ Mould, investment director at AJ Bell.
No comments yet